Why did renewables become so cheap so fast? | Our World in Data

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HomeCO2 & Greenhouse Gas Emissions

Summary<br>For the world to transition to low-carbon electricity, energy from these sources needs to be cheaper than electricity from fossil fuels.<br>Fossil fuels dominate the global power supply because, until very recently, electricity from fossil fuels was far cheaper than electricity from renewables. This has dramatically changed within the last decade. In most places in the world, power from new renewables is now cheaper than power from new fossil fuels.<br>The fundamental driver of this change is that renewable energy technologies follow learning curves, which means that with each doubling of the cumulative installed capacity their price declines by the same fraction. The price of electricity from fossil fuel sources however does not follow learning curves so that we should expect that the price difference between expensive fossil fuels and cheap renewables will become even larger in the future.<br>This is an argument for large investments in scaling up renewable technologies now. Increasing installed capacity has the important positive consequence that it drives down the price and thereby makes renewable energy sources more attractive earlier. In the coming years, most of the additional demand for new electricity will come from low- and middle-income countries; we have the opportunity now to ensure that much of the new power supply will be provided by low-carbon sources.<br>Falling energy prices also mean that people’s real incomes rise. Investments to scale up energy production with cheap electric power from renewable sources are therefore not only an opportunity to reduce emissions but also to achieve more economic growth — particularly for the poorest places in the world.

The world’s energy supply today is neither safe nor sustainable. What can we do to change this and make progress against this twin problem of the status quo?<br>To see the way forward, we have to understand the present. Today, fossil fuels — coal, oil, and gas — account for 79% of the world’s energy production and as the chart below show, they have very large negative side effects. The bars to the left show the number of deaths, and the bars on the right compare the greenhouse gas emissions. My colleague Hannah Ritchie explains the data in this chart in detail in her article ‘What are the safest sources of energy?’.<br>This makes two things very clear. As the burning of fossil fuels accounts for 87% of the world’s CO2 emissions, a world run on fossil fuels is not sustainable; they endanger the lives and livelihoods of future generations and the biosphere around us. And the very same energy sources lead to the deaths of many people right now — the air pollution from burning fossil fuels kills 3.6 million people in countries around the world every year; this is 6-times the annual death toll of all murders, war deaths, and terrorist attacks combined.1<br>It is important to keep in mind that electric energy is only one of several forms of energy that humanity relies on; the transition to low-carbon energy is, therefore, a bigger task than the transition to low-carbon electricity.2<br>What the chart makes clear is that the alternatives to fossil fuels — renewable energy sources and nuclear power — are orders of magnitude safer and cleaner than fossil fuels.<br>Why then is the world relying on fossil fuels?<br>Fossil fuels dominate the world’s energy supply because in the past they were cheaper than all other sources of energy. If we want the world to be powered by safer and cleaner alternatives, we have to make sure that those alternatives are cheaper than fossil fuels.<br>Download

The price of electricity from fossil fuels<br>The world’s electricity supply is dominated by fossil fuels. Coal is by far the biggest source, supplying 37% of electricity; gas is second and supplies 24%. Burning these fossil fuels for electricity and heat is the largest single source of global greenhouse gases, causing 30% of global emissions.3<br>The chart here shows how the electricity prices from fossil fuels have changed over the past 15 years. The data is published by Lazard.4<br>To make comparisons on a consistent basis, energy prices are expressed in ‘levelized costs of energy’ (LCOE). You can think of LCOE from the perspective of someone who is considering building a power plant. If you are in that situation, then the LCOE is the answer to the following question: What would be the minimum price that my customers would need to pay so that the power plant would break even over its lifetime?<br>LCOE captures the cost of building the power plant itself as well as the ongoing costs for fuel and operating the power plant over its lifetime. It, however, does not take into account costs and benefits at an energy system level: such as price reductions due to low-carbon generation and higher systemic costs when storage or backup power is needed due to the variable output of renewable...